Trade to Benefit the Poor Up in 2006 and to Grow in 2007

By David South, Development Challenges, South-South Solutions

SOUTH-SOUTH CASE STUDY

The global fair trade market – in which goods and services are traded under the Fairtrade logo, guaranteeing a minimum fair price to producers experienced unprecedented growth in 2006. In the UK alone, 2006 sales totalled £290 million – a jump of 46 percent from 2005. The Fairtrade Foundation predicts sales will reach UK £300 million in 2007.

In 2005 Fairtrade sales were € 1.1 billion in the brand’s main markets of Switzerland, the UK, New Zealand, Australia and the US. At present fair trade works with 5 million farmers in the global South, and it represents an ever-increasing opportunity for Southern entrepreneurs.

A tipping point has been reached in Western awareness of and demand for the Fairtrade brand and concept, and it is now being adopted by major supermarkets. In the UK, 62 percent of consumers know the logo and understand what it means.

The concept of fair trade began in the Netherlands in 1988, when the Max Havelaar Foundation launched the Fairtrade consumer label with coffee from Mexico. Unlike conventional businesses, where the price paid to a producer is what the market dictates, fair trade guarantees the producer a minimum price for their product. This amount is set at a level that ensures the producer can live a life with dignity and meet all the essentials. A portion of the profits is also kept in a communal fund which the producers democratically elect to spend as they wish (many choose to spend it on community projects).

Fair trade has been criticized for a number of reasons. It has been seen as too small and marginal to really make inroads on poverty, and has been accused of privileging a small number of producers while ignoring the rest. It has also been criticized for not focusing enough on innovation and increasing production to really eradicate poverty in the developing world.

For all its faults and shortcomings, it is a fact that the Fairtrade brand is a runaway success and offers a wide range of opportunities for entrepreneurs.

In the UK, fair trade now includes 2,500 products, ranging from footballs, to tea, cotton and honey – up from just 150 in 2003, an astonishing rate of growth. Where fair-trade products were once confined to co-operative and charity shops, they are now widely sold in major supermarkets.

The success of fair trade is not confined to Europe and the US. It is growing in Japan, where, says fair trade retailer Sonoko Iwasa, “the concept of using trade to equalize the world by buying goods from developing countries from Asia and Africa was a notion that had no connection with everyday lives.”

Iwasa’s Rumaba Goods store just outside Tokyo sells organic chocolates from Africa, woollen gloves and hats from Nepal, and elegant clothes from Thailand. Iwasa found that the key in the highly competitive Japanese consumer market was to focus on quality, not fairness. This, she says, has made these products fashionable.

At present, the fair trade market is worth only about US $6 to $7 million a year in Japan and includes 1,500 products. But according to Michiko Ono of Japan’s best-known fair trade label, People Tree, the trend is catching on among the country’s socially aware youth.

To start a fair trade business, entrepreneurs or producers need first to contact the international body that certifies fair trade products and ensure that production meets the ethical standards required.

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